San Diego Homes

San Diego Foreclosures Frozen by Lenders

The San Diego homes market is looking good. We’re in probably the best market in the US, with the most gains in home prices and number of homes sold over the past 6 months.

Bank of America Foreclosure Moratorium

Last week Bank of America announced that they are going to halt foreclosure on all homes nationwide. This is due to the fact that many lenders have used questionable paperwork to speed up the eviction of home owners behind on their payments. Home owner advocate groups are alleging that lenders have faked documents, forged signatures and have used shortcuts when reviewing home owners files. A nationwide moratorium on all foreclosures is being call for.

What impact will these foreclosure moratoriums have on the San Diego real estate market?

1/3 of home sales are homes that have been foreclosed upon. So what we would see is the number of bank owned properties drop. Usually bank owned properties are less expensive than properties up for sale by home owners. So with a reduced supply we may see an increase in home value. But this isn’t necessarily true. Prospective home buyers and investors know that those foreclosure properties will eventually come on the market. Especially the investors, may wait until the foreclosures come on the market to buy. With out buyers, market values may even fall in some areas as home owners try to kick start the market buy lowering prices.

We may even experience a “credit crunch” with bank mortgage loans becoming hard to come by. While the banks are carrying the ‘bad paper’ loans of the home in default, they won’t have as much money to lend to borrowers to purchase new homes. Experts think that the foreclosure freeze would actually freeze up all the credit and other loans. The worst case scenario is that the US Government would have to step in and ‘bail’ out the banks again, by purchasing the bad debt, so the banks could lend again.

We”l just have to wait and see what happens in the San Diego Real Estate market, good or bad, because of the foreclosure freeze.

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